Capitalism is for the few

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By MICHAEL ROBERTS*

A minuscule number of people (less than 0,1%) own 25% of the world's wealth

Only the top 1% of households own 43% of global wealth, the next 10% own 81%, while the bottom 50% own just 1%. This 1% is made up of multimillionaires in net wealth (after discounting debts); there are only 52 million of them. Within that 1%, there are 175.000 ultra-wealthy people who rake in more than $50 million in net worth. That is, a minuscule number of people (less than 0,1%) own 25% of the world's wealth!

The information comes from 2020 report produced by the Credit Suisse Global Wealth organization, which has just been released. The report remains the most comprehensive and explanatory analysis of global wealth (not to be confused with income) as well as personal wealth inequality in the world. Every year, this report analyzes the wealth of 5,2 billion people around the world. Wealth is made up of financial assets (stocks, bonds, cash, pension funds, etc.) and property (houses, etc.) owned. The report presents wealth after discounting debts. The authors of the report are James Davies, Rodrigo Lluberas and Anthony Shorrocks.

According to the 2020 report, total global household wealth increased by $36,3 trillion during 2019. But the COVD-19 pandemic cut this 2019 increase by nearly half ($17,5 trillion) between January and March 2020. However, as equity markets and property prices rebounded swiftly, thanks to government and central bank credit injections, Credit Suisse researchers estimate that total household wealth was still slightly up in mid-2020. XNUMX compared with the level at the end of last year, although wealth per adult has fallen.

As of mid-2020, global household wealth was $1 trillion above its January level, up 0,25%. As this is less than the increase in the number of adults over the same period, average global wealth fell 0,4% to $76.984. Compared with what would be expected before the COVID-19 outbreak, global wealth has dropped by $7,2 trillion, or $1.391 per adult, worldwide.

The most affected region was Latin America, where currency devaluations reinforced the reductions in GDP in dollars, resulting in a 12,8% reduction in total wealth in dollars. The pandemic also eradicated expected growth in North America and caused losses in all other regions except China and India. Among major global economies, the UK has witnessed the greatest relative erosion of wealth.

Most shocking is the still huge inequality of household wealth across the world. As shown by the wealth pyramid chart below, inequality remains stark, both geographically between the “rich north” and the “poor south”, as well as between households within countries.

At the end of 2019, North America and Europe accounted for 55% of total global wealth, with just 17% of the world's adult population. In contrast, the population share was three times the wealth share in Latin America, four times the wealth share in India, and nearly ten times the wealth share in Africa.

The wealth differences inside of countries are even more pronounced. The top 1% of wealth holders in a country typically own between 25% and 40% of all its wealth; the next 10% usually accounts for amounts between 55% and 75%. At the end of 2019, millionaires worldwide – who make up exactly 1% of the adult population – accounted for 43,4% of global net worth. In contrast, 54% of adults with wealth below $10.000 (ie virtually nothing) together have less than 2% of global wealth.

The researchers assess that the global impact on the distribution of wealth within countries has been remarkably small, given the substantial GDP losses related to the pandemic. In fact, there is no solid evidence that the pandemic has systematically favored higher wealth groups over lower wealth groups or vice versa. In 2019, the number of millionaires worldwide skyrocketed to 51,9 million, but it changed very little overall during the first half of 2020.

At the apex of the wealth pyramid, the report estimates that, at the start of this year, there were 175.690 super high net worth adults in the world with a net worth greater than $50 million. The total number of such adults increased by 16.760 (11%) in 2019, but 120 members were lost during the first half of 2020, leaving a net gain of 16.640 since the beginning of 2019.

During the first half of 2020, the number of millionaires decreased by 56.000 overall, just 1% of the 5,7 million added in 2019. Membership increased in some countries and some lost significant numbers. The UK (down 241.000), Brazil (down 116.000), Australia (down 83.000) and Canada (down 72.000) have eliminated more millionaires than the world as a whole.

It appears that wealth inequality declined in most countries during the early 2000s. The fall in inequality within countries was reinforced by a fall in inequality “between countries”, fueled by rapid increases in average wealth in emerging markets. The trend turned mixed after the 2008 financial crisis, when financial assets grew rapidly in response to quantitative easing and artificially low interest rates. These factors increased the share of the top 1% of wealth holders, but inequality continued to decline for those below the top tail. Today, the bottom 90% represent 19% of global wealth, compared to 11% in the year 2000. In other words, there has been a concentration of wealth towards the top 1% (and even more towards the 0,1%), but with some scatter among the remaining 99%.

The researchers concluded that the small decline in wealth inequality in the world as a whole “reflects the narrowing of wealth differentials across countries, as emerging economies, particularly China and India, grew at above-average rates. This is the main reason why global wealth inequality fell in the early years of the century, and although it increased during the decade from 2007 to 2016, we believe that global wealth inequality re-entered a downward phase after 2016 ”.

In sum, what the report shows is that billions of people have no net wealth at all, and that the distribution of global personal wealth reflects a world in which some giants such as Gulliver of the fable are now looking down and contemplating an immense mass of lilliputians.

*Michael Roberts is an economist. Author, among other books, of The Great Recession: A Marxist View.

Translation: Eleutério FS Prado

Originally published in The next recession blog

 

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